Ghosts, Ghouls, And The Duty To Disclose

Imagine: you believe your house is haunted and you are ready to move. The question is, do you have to tell the buyers?

A haunted house is often considered a "stigmatized property" — a property that has non-physical issues or features that may affect its marketability.

In Ontario, real estate transactions follow the motto of "caveat emptor" or "buyer beware". This means that the buyer must do their due diligence prior to purchasing the property. There are a few exceptions to this rule where there may be a duty to disclose including where:

• There is a known hidden defect; or
• To not do so would mislead the buyer.

Stigmatized properties are not "Hidden Defects"

A hidden or "latent" defect is defined as "[a] defect that cannot be discovered by inspection and ordinary vigilance. In determining whether something is a defect, the intended use of the land is a relevant consideration". Common examples are things such as faulty wiring, structural problems, and mould.

In order to trigger the positive obligation to disclose, a hidden defect must render the property unit for habitation or dangerous. A previous murder, suicide, or allegation of a haunting at the property is unlikely to meet this threshold.

In 2013, this very question was before the Ontario Superior Court in 1784773 Ont. Inc. v K-W Labour Association et al.¹ In K-W Labour, the Plaintiff had purchased a commercial property. Afterwards, the defendant's director was quoted as telling a newspaper reporter (jokingly) that the building was haunted.

The Court referred to a 2006 Quebec Small Claims court case² which noted that "[t]he court has a great deal of difficulty in agreeing that elements whose importance depends on the sensitivity, phobias, sentiments, or purely personal and subjective apprehensions that are not related to the quality of the building should be subject to compulsory disclosure".

Ultimately, the Court in K-W Labour granted the motion for summary judgement and dismissed the case on the basis that not only could the plaintiff not prove the existence of a ghost but that an alleged "haunting" does not suggest that the building is unfit for habitation with its use as a commercial building.

You cannot mislead a buyer about a haunting

Often, in Agreements of Purchase and Sale you will see the following language:

The Seller warrants to the best of their knowledge, that the property has never been used as a grow house and no suicides/murders have occurred on this property during or prior to their ownership.

RECO and OREA (the governing bodies for realtors in Ontario) set out in a bulletin³ that realtors may have an ethical obligation to disclose stigmatizing matters to potential buyers. This obligation is more moral than legal in nature, as there is currently no obligation on realtors or sellers to disclose stigma concerning a property (unless it also qualifies as a hidden defect—see threshold discussed above).

So, if there's no positive duty on sellers to disclose a potential haunting, what can you do to protect yourself?

Although there is no positive obligation on the seller to disclose, they are not allowed to mislead the buyer. This is why you often see the no murder/suicide/grow house provision in agreements. If a seller represents that they are not aware of a murder at the property, and this turns out to be untrue (and they were in fact aware of it), this is considered a fraudulent misrepresentation.

A fraudulent misrepresentation is when a false statement is dishonestly made in order to coerce you into entering a contract. It includes the following necessary elements:

• The wrongdoer must make a representation of fact to the victim;
• The representative must be false in fact;
• The party making the representative must have known the representation was false at the time it was made;
• The misrepresentor must have intended the victim act on the representation; and
• The victim must have been induced to enter into the contract in reliance upon it.

In Weng v Shao⁴ the British Columbia Court of Appeal considered an appeal of a trial decision which found that a "misrepresentation by omission" relating to a tragic murder in front of the home amounted to a fraudulent misrepresentation which allowed the buyer to rescind the contract.

In overturning the decision, the Court of Appeal noted:

The doctrine of caveat emptor is not intended to permit sellers to deceive buyers. It is a principle that recognizes that if buyers were required to disclose every possible feature relating not only to the physical and extrinsic qualities of their properties but also to all possible sensitivities and superstitions buyers might have, there would be no end to the resulting litigation. The doctrine places on the buyer the onus of asking specific questions designed to unearth the facts relating to the buyer's particular subjective likes and dislikes. The answer given by the plaintiff's agent to Ms. Deng's question (that the daughter needed a better chance to practice her English) was an honest answer as far as it went, and in my opinion she was not required to supplement it with a description of the entire chain of events that led to the enrolment of the plaintiff's granddaughter at the new private school — unless the buyer asked specifically why the girl had been at a public school or whether any violent deaths had occurred during Ms. Wang's tenure of the property.

Had the buyer asked whether there was any murder on the property (which would have been easily discoverable by a Google search) then the outcome of this case could have been different.

The moral of the story: do your homework and ask any questions that would be important in your decision to buy a home, get it in writing... and have a happy spooky season!

Footnotes

1 2013 ONSC 5401 (CanLII), <https://canlii.ca/t/g0qb4>

3 RECO Bulletin No. 7.5 Stigmas

4 2019 BCCA 130 (CanLII), <https://canlii.ca/t/hzwdn>